I - Incorporation of ESG criteria
Groupama AM offers its customers a resolutely active, conviction-based management approach, with an emphasis on medium to long-term investment. Our approach aims to incorporate ESG in every asset class (equity, credit and sovereign bonds). This conviction-based style of investment management requires to understand the transformations taking place in our society, prompt and effective identification of risks and rapid detection of the new opportunities for generating added value. We believe that three transitions are profoundly transforming today’s businees models and that ESG provides a key to analyze their impacts on corporates :
Energy and environmental transition: change over from an economy founded on fossil fuels to an economy based on low-carbon energy sources, with management of the environmental impacts of their activities.
Digital transition: in-depth transformation of the internal processes of companies and of their relations with their customers and suppliers and with civil society, due to the use of new technologies and their capacity to store and manage data on a massive scale (“big data”).
Demographic transition: consequences of social trends – ageing population, urbanization and increasing inequalities – confronting companies with new challenges in the management of their human capital and customers.
With the combination of the ESG and financial roles in the Research team, the same analyst is undertaking the entire investment analysis. For each sector under review, our analysts determine the specific sectorial impacts of these transitions, which help them to select the relevant and material Environmental, Social and Societal criteria for their investment case. Governance is based on a cross-sectorial appraoch, and is a key element of our fundamental analysis. The assessment of each E, S and G pilar can then impact one of our financial critera and therefore leads to a single combined financial and ESG recommendation. With this fundamental financial and ESG analysis, we aim to identify the players that are best positioned or most at risk with regard to the three transitions – digital, demographic and environmental.
Our ESG integration policy involves formalizing the consideration of ESG criteria in investment decisions, depending on the materiality of the issues at stake (with respect to the issuer and the industry) and the investment process being considered. In this way, ESG criteria reinforce key décisions and help to identify specific risks and opportunities.
To meet this goal we have set up internal ESG training courses for our asset managers.
II - Specific approaches
Groupama AM is also established three dedicated lists related to the specific ESG issues :
- List of Major ESG risks : a list of the highest-risk issuers in terms of ESG. These companies are identified based on two sources : controversial companies flagged by our provider and confirmed with an internal analysis, and companies with very low governance standards according to our internal analysis.
- List of ESG Opportunities : in 2019, we added a list of the most advanced issuers in terms of ESG issues. The companies on this list are identified by analysts based on their internal analysis. The choice must be justified in a dedicated file.
- Carbon Opt-out policy : In 2019, in line with with our historic commitment to Sustainable Finance, Groupama AM took the decision to implement a policy of exclusion from the coal sector. The objective of this policy is to reduce our exposure in our investments to climate risks, whether physical or transition risks.
A proprietary tools makes all internal ESG and financial research available to portfolio managers, enabling them to integrate ESG factors in their investment process.
III - Dedicated ESG offer
Our SRI range is composed of three funds, two of them are certified by the French "Label ISR" :
- SICAV Euro Capital Durable – Label ISR.
- FCP GROUPAMA Crédit Euro ISR – Label ISR
- FCP GROUPAMA Etat Euro ISR
Our thematic and impact investing range is compsed of two funds, both are certified by french SRI labels:
- G Fund Future for Generations - Label ISR
- G Fund Global Green bonds - Label Greenfin
IV - Shareholder engagement
For Groupama AM, shareholder engagement is a deliberate and constructive initiative by one or more investors to demand that identified companies make real efforts to improve their ESG practices. Our approach is based on both individual and collaborative engagement and on our strong presence on the Paris market. In the 2019 we have defined the objectives and priority areas of shareholder commitment. We focused both on individual and collaborative engagement.
- Our individual engagement process is based on:
- A direct and recurrent dialogue on ESG subjects with the top management of the European large caps;
- A rigorous voting policy (in place since 2001), which is updated annually. Mobilizing portfolio managers, analysts and middle office, the exercise of voting rights covers more than 200 general assemblies in all the countries of the European area.
- Meetings with companies before their General Meetings: discussions on the draft-resolutions.
- Collaborative engagement: participation in collective actions to promote shareholder dialogue as part of the PRI platform. In 2018 we structured our engagement collaborative process. A methodology for selecting, validating and implementating each collaborative commitment was set up. Each new commitment must be signed directly by our CEO.